- The EUR/USD remains stable as US private employment figures in September were disappointing, revealing ongoing weaknesses in the labor market.
- Fitch Ratings noted that a government shutdown could reduce GDP growth by 0.1-0.2% weekly, but the outlook for the debt credit rating stays the same.
- While the Eurozone PMI surpassed expectations along with inflation data, the ECB is perceived to be maintaining its current policy after President Lagarde’s cautious remarks.
The EUR/USD is hovering around 1.1720 during the North American trading session as market participants process lackluster job reports and the implications of the US government shutdown. The standoff between the White House and Democrats could prolong the shutdown and cause delays in the release of US economic data.
The euro holds steady near 1.1720 as investors weigh weak ADP reports and ongoing governmental issues along with stable Eurozone data
The September ADP employment figures were disappointing, accentuating the labor market’s weaknesses. Despite this, business activity in the US manufacturing sector has shown some improvement, although it’s continued to contract for seven straight months.
Addressing the ongoing political turmoil, Vice President JD Vance mentioned that he doesn’t expect the shutdown to persist for too long and promised to do everything possible to ensure essential services continue.
On another note, Fitch’s ratings indicated that the government shutdown would have no immediate effect on the “AA+ stable” credit rating of US debt. They projected that shutdowns could cut GDP growth by 0.1-0.2% each week.
In the Eurozone, the HCOB manufacturing PMI for September exceeded expectations, albeit with signs of inflationary pressures. Nevertheless, the European Central Bank (ECB) is anticipated to maintain its course after President Lagarde noted that inflation risks appear to be balanced.
Daily Market Movement: Fed’s Goolsbee’s Hawkish Tone Caps Euro’s Progress
- Austan Goolsbee, President of the Chicago Federal Reserve, expressed concern over inflation exceeding the central bank’s target of 2%, adding that the shutdown would complicate matters if key economic data were postponed.
- The ADP reported unexpectedly low growth in private employment, with only 32,000 contracts added in September, following a downward revision of August’s job losses to 3,000. The market had anticipated an increase of at least 50,000.
- Meanwhile, the ISM manufacturing PMI slightly adjusted its forecast from 49.0 to 49.1, marking a continued contraction in the sector for the seventh consecutive month, up from 48.7 in August.
- Fitch’s ratings predict that the US dollar will maintain its status as the dominant global reserve currency amid increasing policy uncertainties, stating that changes to previously enacted Medicaid cuts will have minimal short-term fiscal implications, with most effects expected to emerge after 2028.
- Eurozone HICP grew by 2.2% in September, consistent with expectations, following an increase above 2% in August. Core HICP remained stable at 2.3% year-on-year, aligning with projections. Concurrently, the Eurozone HCOB manufacturing PMI increased from 49.5 to 49.8 in September.
Technical Outlook: EUR/USD Stability Around 1.1730 Awaiting New Catalysts
The EUR/USD has remained above the 1.1700 mark for four consecutive sessions but is currently struggling to push above 1.1750. The relative strength index (RSI) is settling near the neutral 50 level, suggesting a lack of clear direction.
If the EUR/USD breaks past 1.1740, it could face resistance at 1.1800, with an annual peak at 1.1918 as a target. Conversely, if it dips below 1.1700, it might reach 1.1650, with stronger support around the 100-day SMAs near 1.1611.
